Defined Contribution (DC) Retirement

Our research is based on Asset International's proprietary data sources–including Simfund MF, PLANSPONSOR and PLANADVISER surveys, and Pathfinder 2.0, the leading recordkeeper search and comparison tool for advisers.

Mutual funds held in the Defined Contribution market experienced net inflows of $78.3 billion over the past twelve months ending in September 2018. Net inflows in the third quarter totaled $2.3 billion, a substantial decrease from $23.4 billion in Q2’18. Non-Life Cycle funds had the highest net new flows over the past twelve months at $41.7 billion while experiencing a notable downturn in the third quarter of -$4.1 billion.

Mutual funds held in the Defined Contribution market experienced $96.3 billion in net deposits over the past twelve months ending in June 2018. Net inflows in the second quarter totaled $23.4 billion, down from $32.1 billion in Q1'18. Target Date funds accounted for $39.0 billion in net flows over the past year, accounting for 41% of total DC flows.

During the last 12 months ending in March 2018, the Defined Contribution market experienced net inflows of $94.2 billion. Target Date funds were responsible for $40.5 billion in net deposits over that period, equivalent to 43% of overall flows. The DC market experienced net inflows of $32.1 billion in the first quarter, up from $20.4 billion in Q4’17.

During 2017, the Defined Contribution market experienced net inflows of $89.9 billion, with $41.5 billion (46%) of these flows attributable to Target-Date funds. The market saw net deposits of $20.5 billion in the fourth quarter of 2017, a significant improvement over the $42 million seen in Q4 2016.

Over the last 12 months, the Defined Contribution market has experienced net inflows of $70.1 billion, with $34.9 billion (50%) of these flows attributable to Target-Date funds. Net inflows of $20.5 billion for the third quarter of 2017 represent a 53% increase when compared to the $13.4 billion brought in during Q3 2016. When excluding Life Cycle funds, the Taxable Bond and International Equity categories saw the greatest inflows for the quarter with $8.7 billion and $5.6 billion, respectively.

Over the last 12 months, the Defined Contribution market has experienced net inflows of $62.5 billion, with $35.7 billion (57%) of these flows attributable to Target-Date funds. Net inflows of $21.0 billion for the second quarter of 2017 represent a 17% increase when compared to the $18.0 billion brought in during Q2 2016. When excluding Life Cycle funds, the Taxable Bond and International Equity categories saw the greatest inflows for the quarter with $7.3 billion and $4.6 billion, respectively.

The last 12 months saw net inflows of $59.7 billion into DC, with $37.0 billion (62%) attributable to Target-Date funds. Net inflows of $28.7 billion for the first quarter of 2017 represent a 42% increase when compared to the $20.2 billion brought in during Q1 2016. When excluding Life Cycle funds, the two categories for receiving the majority of flows for the quarter were Taxable Bond (51%) and International Equity (44%).

Over the course of 2016, DC net inflows amounted to $53.3 billion; a 57% increase from 2015, but down 2% from 2014. On a quarter-over-quarter basis, Q4 flows of $2.1 billion are down 84% as compared to Q3’s flows of $13.1 billion. These quarterly flows are down 48% year-over-year from Q4 2015. Target Date funds in this universe received $3.1 billion, or 151%, of the total quarterly flows.

Through the first three quarters of 2016, DC net inflows amounted to $51.5 billion; a figure that represents 151% of 2015 full year total net flows and 95% of 2014 full year net flows. On a quarter-over-quarter basis, Q3 flows of $13.3 billion are down 25% as compared to Q2’s flows of $17.6 billion. Target Date Funds brought in $9.5 billion for the quarter.

DC flows for the first half of 2016 were up 25% as compared to the first half of 2015, while Q2 2016 showed an 83% increase in DC flows versus Q2 2015. With $38.9 billion of net inflows year-to-date, DC flows have already surpassed the $34.6 billion brought in during all of 2015. Target Date funds in this universe received $11.1 billion, or 61%, of the total quarterly flows.

As compared to the first quarter of 2015, overall DC flows for 1Q16 were down 9%. The $20.6 billion of inflows for the quarter were a marked improvement from the flows of the last several quarters, but not an atypical start to the year. Target Date funds in this universe received $9.2 billion, or 45%, of the total quarterly flows. Additionally, the other fund types that saw notable flows for the quarter were International Equity ($6.7 billion) and Taxable Bond ($4.0 billion).

This edition of the DC Research Suite is the second analysis of investment options within recordkeeping proposals, as tracked in Strategic Insight’s Pathfinder database. The first analysis, released in 2012, reviewed fiduciary obligations for plan administration including the framework and frequency for review, benchmarking, and areas of evaluation. This update reflects comprehensive search activity over a four year stretch (2011 to early 2015), focusing primarily on the proposed mutual fund investment options.

This inaugural DC Flow Watch highlights the strides Strategic Insight has made in demystifying the DC mutual fund marketplace via distributor and 5500 data sets. Please note that DC Flow Watch is a working template comprised of two independent data sets, and that this report is to be enhanced as the entire DC data set grows.

This presentation features SI's growth outlook for defined contribution and highlights a few key opportunities within the defined contribution marketplace, including investment-only, mega plans, and target date funds.

This edition of the DC Research Suite briefly highlights participant status relative to an array of measures commonly used to gauge plan success, many of which could be enhanced by implementing behavioral finance concepts.

The structure of DCIO-focused sales teams varies from firm to firm, dependent on internal commitment to DCIO and firm resources. This analysis covers 22 DCIO sales organizational structures, based on sales and geography charts distributed on Web sites and at conferences.

Integrating geographical data points beyond domicile not only can enhance portfolio analysis but may alter the way asset allocation based on geography is perceived and constructed. Within the framework of defined contribution, this topic brief seeks to explain why an enhanced approach to geographic classification is justified in light of increasing retail investor global exposure.

This excerpt from SI's quarterly Windows into the Mutual Fund Industry report introduces some of the DC mutual fund data available in Simfund Pro 7.0. Approximately $1.2 trillion mutual fund assets can be attributed to the DC channel with certainty as of March 2014.

Analysis of PLANSPONSOR DC Surveys results over years 2009 through 2013 reveals that plan sponsors have enhanced key features of their retirement benefits. Plan design features that saw aggregate improvements include employer matching contributions, formulas, schedules and vesting.

As of Q3’13, the ICI estimated 403(b) plans to account for $839 billion in assets, or approximately 15% of the $5.5 trillion DC market. This spotlight details two segmentation approaches to the 403(b) market: by Industry and by ERISA Status.

Sweden’s pension system is highly regarded for both retirement income replacement and pension sustainability, attributable to contribution rates of at least 18.5%. Approximately $22 billion of target retirement date assets tracked in Simfund GL reside in the Swedish market.

This report provides defined contribution market sizing and forecasts by plan type, plan size, and vehicle structure as well as summary findings from PLANADVISER’s second annual DCIO Manager Survey, which was fielded during the second quarter of 2013.

This edition of the DC Research Suite details the drivers of change and search activity for DC investment
managers and plan providers. Gatekeeper services that will significantly alter DC investment product distribution are analyzed: provision of custom funds, investment education, and fiduciary services.

This report segments recordkeepers by core business, plan size and plan type based on six years of historical PLANSPONSOR Recordkeeping Survey data. In addition to segmentation, technologies and consolidation are analyzed. Detail on growth rates by plan segment, market share by plan type, and adviser compensation approaches is provided.

This edition of the DC Research Suite reviews fiduciary obligations regarding plan administration. An introduction to Pathfinder 2.0 is provided, as its initial 2012 database of mutual funds proposed in recordkeeping bids represents the universe upon which our investment option analysis is based. The investment option analysis is driven by Simfund MF and highlights strategy, performance, and fees.

Key questions answered include: What share of the DC market do mutual funds and collectives represent, and how will that change by 2017? What is the outlook for target date, target risk, and index funds within DC? What are the most common share classes used in DCIO by assets? What are the average distribution fees (12b-1 and revenue share/sub-TA) for each plan segment? What do DCIO managers consider to be their biggest opportunities and challenges?

Key questions answered include: What is the institutional perspective on revenue sharing in DC plans, and how does that impact vehicle usage? What fund share classes are used in institutional DC and what percent of assets is held directly by institutional investors versus by funds-of-funds? What are the considerations for institutional DC-oriented product development (including mutual funds, collective funds, and unitized custom products)? Who are the top consultants and recordkeepers for institutional DC clients and what are best practices for supporting these gatekeepers?

Key questions answered include: How is the defined contribution market segmented and how does that impact plan sponsor relationships? Which plan segment has the most assets? How strong is the plan sponsor’s relationship with their recordkeeper? How often do plan sponsors evaluate recordkeepers and what does that mean for DC investment option assets? Who do plan sponsors consider to be their main source of insight for investment monitoring?